The trading session on Monday began with a lower gap in the USD/JPY, followed by a subsequent partial recovery. In this market, volatility remains a constant presence, with a key obstacle looming at the ¥150 level. It is above that level that we will see a lot of fireworks from what I can see.
The ¥150 threshold commands significant attention from traders due to its being a large, round, and psychologically important number. Recent market activity underscores the ¥150 level's prominence, characterized by the massive selling that we had seen when we got there last time.
Beneath the current trading levels, the ¥147.80 level emerges as a substantial support zone. As seen via “market memory”, this level had previously served as a formidable resistance point. Adding to its significance, the 50-Day Exponential Moving Average is approaching this important level, amplifying its role as a potential pivot point in market dynamics.
The never-ending low-interest rate policy of the Bank of Japan continues to exert downward pressure on the Japanese yen. Simultaneously, the United States maintains higher interest rates, rendering the US dollar an attractive prospect for investors. This interest rate dynamic bolsters the USD's appeal, and of course, it is also a safety currency so that comes back to help it as well.
Waiting For a Potential Short-term Consolidation
At the end of the day, this market remains entrenched in volatility, with a formidable resistance barrier at the ¥150 level. The significance of this level is underscored by its status as a psychological and technical focal point. The ¥147.80 level, backed by the 50-Day EMA, offers substantial support below. The enduring low-interest rates in Japan and the higher rates in the United States sustain the attractiveness of the US dollar. The prevailing trend remains intact unless a break below the 50-day EMA occurs. A successful breach of the ¥150 level could propel the USD towards the ¥152 region, previously established as a high point. Amidst these conditions, traders should anticipate potential short-term consolidation and oscillations in the vicinity of the ¥150 level as market participants navigate the hurdles and opportunities presented by this market.
Potential signal: Buying the USD in this pair is the only way to trade it. I have been adding slowly, and only to the upside. I will add significantly if we can get a daily close above the 150 level. At that point, I will be looking to reach 134.5, with a stop loss at the 148.5 level.
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